‘Businesses can use PTI NZ’s BIS as planning, forecasting tool’

In September 2018, Pacific Trade Invest (PTI) New Zealand and Bagrie Economics, a boutique research firm that specialises in independent, authoritative analysis of the New Zealand economy and economic issues collaborated to launch the Business Intelligence Survey (BIS).

The quarterly survey aims to help inform businesses and policy makers on economic trends by providing timely gauges of economic momentum and expectations for growth, employment and investment going forward. It is particularly relevant as an information source given New Zealand’s additional financial commitment to the Pacific region.

With the first two surveys out last year (in September and December),Pacific Periscopecaught up with Bagrie Economics head Cameron Bagrie, who has been an economist for 20 years. For over 11 years he was the Chief Economist at ANZ. He has also worked as an economist at the National Bank, Treasury and Statistics New Zealand.

How did the PTI NZ BIS come about, and why is the BIS different from other surveys?

The quarterly survey evolved out of discussions between Michael Greenslade, PTI NZ Trade & Investment Commissioner, and Bagrie Economics as we looked at economic indicators across the region and discussed ways of getting more timely information out there and getting the views of businesses on what was going on.

Surveys that use the views of business on growth, hiring and investment are common around the globe and provide timely reads on economic momentum. Is the economic pulse slowing or gaining momentum? Hard data answers that with a lag so we are always looking in the rear-view mirror. But surveys or timely hard data (such as this quarterly BIS series) tell us about the here and now, and the future.

What are the broad trends that the two surveys so far show?

The two surveys have shown incredibly good economic momentum across the Pacific, both concurrently and expectations for the six months ahead. Pacific businesses are seeing good growth, are hiring and investing.

The surveys have also identified access to capital as a major constraint on the ability of Pacific businesses to grow. Access to skilled staff is becoming more noted as a constraint. These insights can help policymakers shape policy responses to assist easing those factors as constraints.

Firms are also reporting rising pressure on input costs. This is not being reflected in final good prices for now. This flags some potential pressure on margins and needs to be watched.

Businesses are also more upbeat about prospects for their own business activity than the general economy. This is a trend we tend to see in New Zealand as well and flags that businesses just tend to get on with it.

How can businesses around the region and investors interested in the region use thequarterly BIS as an effective information tool?

The first and most important thing is to be part of the survey. The surveys are only as good as the number of respondents we have. The more the better. As the number of respondents grow it may be possible to report on different countries in the Pacific or sectors. The Pacific is a vast region and collection of nations.

Information is critical for any business and investor, and the BIS is helping fill an information void by making more timely information available. As we build up a time series for the BIS, we will be able to map it to the official data such as gross domestic product and assess the relationship between the two.

For now, we need to focus on the spirit of what the survey is saying. Is growth strong or weak, accelerating or decelerating? Is growth being back up by hiring and investing. The answer is yes on both counts. Is the survey telling us something about margins or costs? Should we be watching our debtors?

These are examples of little issues firms need to be on top of, and the surveys can give an early heads-up on pending pressure points.

Can the survey be used as a tool for forecasting and planning?

The surveys can be used for forecasting and planning, primarily in a short time horizon. Because it is timely, the survey will give an early heads-up on turning points in the cycle. Is the economy speeding up, or slowing down? Is something spooking businesses? Businesses can use this in their business planning.

Over time, as we map the survey to official data and see the relationship between the two, it’ll become more insightful on pending economic trends. Some sectors may find that the results map specifically to areas of their business. For example, a recruitment firm should be monitoring hiring intentions. Skill shortages means more demand for training.

The collective view of businesses is very powerful. These attitudes do tend to manifest into the so-called hard or official data. So, when businesses say they are experiencing strong growth and expect more of the same, they tend to manifest into reality as these businesses are key drivers of growth themselves by their actions. But when the herd turns the other way, the economic story can change quickly too.

Policymakers should be using the survey in their planning processes too. Access to credit has been noted at the biggest firm holding Pacific businesses back. Policy work needs to be shaped to address that, and the survey can help measure progress.